RECOMMENDATIONS FOR BANKSAUGUST 2023

SUMMARY
INTRODUCTION .............................................................................................................................. 3
GENERAL RECOMMENDATIONS ................................................................................................... 5
ELEMENTS OF A ROBUST BANK NET-ZERO TRANSITION PLAN (NZTP) .............................. 5
CLIMATE SCENARIOS TO USE TO LIMIT GLOBAL WARMING TO 1.5°C ................................ 5
DECARBONIZATION TARGETS .................................................................................................. 6
KEY ALIGNMENT AND COMPANY ASSESSMENT RESOURCES ............................................. 8
SCOPE OF APPLICATION OF THE NZTP ................................................................................... 9ENERGY SECTOR IN GENERAL .................................................................................................... 11
COMPANY DATABASES TO BE USED ..................................................................................... 11
POINTS OF ATTENTION FOR THE OIL AND GAS SECTOR .................................................... 12
Definitions………………. ................................................................................................................. 14
COAL SECTOR ............................................................................................................................... 16
GENERAL SECTOR OVERVIEW ................................................................................................ 16
OVERALL OBJECTIVES ............................................................................................................. 16
RECOMMENDATIONS FOR RULES AND STANDARDS ........................................................... 17
1.

Recommendations on targeted restrictions at project level ............................. 17

2.

Recommendations on targeted restrictions at corporate level ........................ 17

What to expect from companies ............................................................................................. 17

Reclaim Finance – Recommendations for banks – August 2023

Restrictions at corporate level ................................................................................................. 18
3.

Recommendations on targeted restrictions on metallurgical coal .................. 20

OIL & GAS SECTOR ....................................................................................................................... 21
GENERAL SECTOR OVERVIEW ................................................................................................ 21
OVERALL OBJECTIVES ............................................................................................................. 21
RECOMMENDATIONS FOR RULES AND STANDARDS ........................................................... 21
1.

Recommendations on targeted restrictions at project level ............................. 21

2.

Recommendations on targeted restrictions at corporate level ........................ 22

What to expect from companies ............................................................................................. 22
Restrictions at corporate level ................................................................................................. 22
POWER SECTOR ........................................................................................................................... 25
GENERAL SECTOR OVERVIEW ................................................................................................ 25
OVERALL OBJECTIVES ............................................................................................................. 25
RECOMMENDATIONS FOR RULES AND STANDARDS ........................................................... 26
1.

General targets in the power sector ................................................................... 26

2.

Recommendations on targeted restrictions at project level ............................. 26

3.

Recommendations on targeted restrictions at corporate level ........................ 26

What to expect from companies ............................................................................................. 27
Restrictions at corporate level ................................................................................................. 28
CLIMATE LOBBYING ..................................................................................................................... 31

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INTRODUCTION
Human activity has already warmed the world by about 1.1°C since pre-industrial times. 1
As the IPCC has repeatedly warned, limiting global warming to 1.5°C is essential to avoiding
catastrophic changes to the environment and human life. Every additional increment of global
warming worsens the impact and even at 1.5°C – and even more so at 2°C – climate change
will have major consequences on our societies and ecosystems. Indeed, the consequencesof climate change have become painfully obvious in recent years.
However, according to the United Nations, 2 current policies would lead to a 2.8°C temperaturerise by the end of this century and a rise of 2.4 to 2.6°C even if climate pledges are met.
According to the IPCC’s Sixth Assessment Report, CO2 emissions must be cut by 50%, andemissions of all major greenhouse gases (GHGs) by 45% by 2030 to stay on track to limit
global warming to 1.5°C. 3 Only an urgent system-wide transformation can deliver thenecessary emission cuts.
Reducing GHG emissions requires a rapid reduction in fossil fuel supply and consumption,
and a commitment to this is a key climate policy litmus test. But, achieving cuts at this scalerequires breaking with current trends: governments are in aggregate planning to produce
around 110% more fossil fuels in 2030 than would be consistent with limiting global warming
to 1.5°C, and 190% more by 2040. 4 Existing and currently planned fossil fuel infrastructurealone would emit about 850 GtCO2, 350 GtCO2 5 more than the quantity of CO2 that humanity
can still emit to keep global warming at 1.5°C. 6
The last eight years have been the warmest years on record. 7 Between 1970 and 2019, 4.6
million people died in 22,300 disasters associated with natural hazards, causing US$4.9 trillion
in economic losses. 8 In 2021, natural disasters caused overall losses of US$280 billion. 9
If urgent action is not taken, climate change could cost the world’s economy US$178 trillion
by 2070 10. The cost of adapting to climate impacts is expected to grow to US$160-340 billion
per year by 2030, and US$315-565 billion per year by 2050. 11 Moreover, the cost of
humanitarian assistance due to the climate crisis could double by 2050 (US$20 billion peryear), 12 and 216 million people could be forced to migrate within their own countries by 2050. 13
By contrast, bold climate action could deliver US$26 14 to US$43 15 trillion in economic benefits
through to 2030, compared with business-as-usual.
To scale up alternatives to fossil fuels and achieve the necessary emission cuts, financial
flows and services must be redirected from high-emitting activities to sustainable ones.
Renewable capacity additions must quadruple between 2021 and 2030 (from 290 GW to 1,200
GW). 16 At least US$4.3 trillion in annual finance flows are needed by 2030 to stay on track for
1.5°C, compared to US$480 million per year on average in the last decade. 17 Concretely, forevery US$1 spent globally on fossil fuels in 2030, more than US$9 must be spent on “clean
energy”. 18

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In light of the urgent situation explained above, this document lays out essential demands forbanks to align with the international goal of limiting global warming to 1.5°C.

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GENERAL RECOMMENDATIONSELEMENTS OF A ROBUST BANK NET-ZERO TRANSITION PLAN (NZTP)
A credible and comprehensive NZTP must be made public and contain a range of general andsectoral measures, including commitments, restrictions, and exclusions.
The NZTP shall rely on science-based scenarios and databases.
A comprehensive NZTP shall include the following elements:•

Decarbonization targets for financed and invested emissions 19 from portfolios or
economic sectors. These allow banks to align their overall activities with the 1.5°C
scenarios described above, and with the 50% reduction in CO2 emissions required by
the Race to Zero, based on the findings in the IPCC’s Special Report on 1.5°C and Sixth
Assessment Report.

•

Sectoral policies presenting expectations and restrictions, with priority given to themost emitting sectors. Adopting decarbonization targets is by no means sufficient toensure corporate alignment with a 1.5°C scenario. Indeed, the fight against climatechange implies concrete actions with a real impact on the economy and the energy
mix. Thus, the objectives of reducing GHG emissions must be associated withmeasures and indicators that will lead to the decline of the most polluting activities on
the one hand, and the development of alternative solutions on the other. Sector
policies shall clearly and precisely explain what is expected from companies active inthe sector. Policies must also explain the engagement and restriction measures thatbanks will implement in order to secure the alignment of financed and portfolio
companies with these expectations.

•

Governance, executive remuneration and lobbying policies. which must be madeconsistent with the overall NZTP.

CLIMATE SCENARIOS TO USE TO LIMIT GLOBAL WARMING TO 1.5°C
Banks shall adopt a NZTP aimed at contributing to the goal of limiting global warming to 1.5°C,
which entails reducing CO2 emissions by about 50% by 2030 and reaching net-zero CO2emissions by 2050 at the latest. This plan must be developed based on credible and robust
science-based scenarios.
Alignment and carbon neutrality commitments and pledges mean that banks’ emissions
targets are based on no or low overshoot 1.5°C pathways with limited use of negativeemissions. Relying on large quantities of negative emissions increases the risk ofovershooting the temperature target in case carbon capture technologies and solutions are
not deployed or effective at scale and/or do not ensure the permanence of the GHG removals.

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In the present document, the term “1.5°C scenario” is used as shorthand for low or noovershoot 1.5°C scenarios with limited use of negative emissions.
When banks refer to the Paris Agreement, they shall make it clear that they are aligning with
the Agreement’s stronger target of limiting global warming to 1.5°C, not the weaker "wellbelow 2°C" objective.
It is recommended to use the following scenarios for referring to 1.5°C global scenarios withno or low overshoot and limited use of negative emissions:•••

One Earth Climate Model (OECM) by the University of Technology Sydney Institute for
Sustainable Futures and supported by the UN-Convened Net-Zero Asset Owner
Alliance (AOA). The OECM includes the use of nature-based removals increasing overtime to 1.4 GtCO2 per year by 2050 to compensate for cement process emissions. It
does not use technological carbon capture and storage. It includes regional data, andsectoral pathways covering Scope 1, 2 and 3 emissions.
The Net Zero Emissions by 2050 Scenario (NZE) by the International Energy Agency(IEA). This was first published in May 2021 and updated in the October 2022 World
Energy Outlook. It includes technology-based removals (direct air capture (DAC) andbiomass energy with carbon capture and storage (BECCS)) ramping up to 1.5 GtCO2
per year in 2050. 20
The twenty-six 1.5°C no or low overshoot scenarios published in the IPCC’s 6th
Assessment Report and identified by the International Institution for Sustainable
Development (IISD) as not relying on unrealistic amounts of negative emissions. 21

DECARBONIZATION TARGETS
Decarbonization targets adopted by banks shall:•

Cover all financial activities leading to material levels of emissions – Targets shallcover all divisions of a bank group, including retail, corporate, investment and privatebanking, wealth/asset management, and insurance. They should cover lending (retail,SMEs, corporate, structured – including asset and project based, trade finance);
underwriting and/or structuring (equity and bonds); capital markets; and owned andmanaged investments (in banking and asset management divisions) in classes forwhich financed emissions are material and for which methodologies exist, in particular
listed equity and corporate bonds, unlisted equity, projects and infrastructure, private
equity and real estate. 22 Banks should work with standard setting bodies such as
Partnership for Carbon Accounting Financials (PCAF) to develop methodologies tomeasure emissions for other classes and activities including cash holdings, sovereign
and municipal bonds, derivatives, and advisory and M&A activities. Targets should be
set in these classes and activities once agreed methodologies are available.

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Include interim and long-term targets – The long-term target of net zero emissions by
2050 at the latest shall be accompanied with a target for 2030 consistent with the UN
Race to Zero criterion of a “fair share” of the 50% global cut in CO2 emissions requiredby 2030. An interim target for 2025 should also be set, as is required by the Net Zero
Asset Owner Alliance (NZAOA) and recommended by the UN High-Level Expert Groupon net zero (HLEG). In advance of 2030, targets should be set for 2035 and 2040.

•

Include absolute and intensity metrics – Targets shall be set in absolute GHG
emission reductions to ensure they result in real-world reductions aligned with 1.5°C
pathways. Absolute targets can be supplemented with both physical- and revenuebased intensity indicators to facilitate comparisons of ambition and progress within
sectors, and between portfolios, financial institutions, and regions. 23•

Cover all material emission scopes – Targets shall cover all emission scopes wherethese are material. Where data quality is low, proxy or estimated data should be usedas per the PCAF methodology, 24 and banks should engage with companies andregulators to promote improved disclosures. As is noted by Glasgow Financial Alliancefor Net-Zero (GFANZ), “Scope 3 should be included at a minimum for high-emitting
sectors, such as the priority sectors identified in the NZAOA target-setting protocol.”25
Among these sectors are oil and gas, utilities (including coal), transport, steel,cement, agriculture and forestry, and chemicals.

•

Differentiate between GHGs – Targets should be set in CO2-equivalent to measure
overall warming impact with separate targets for CO2 and CH4 in the energy sector,
and for other GHGs as relevant for other sectors (e.g., N2O for agriculture, andindustrial gases for relevant industrial sectors). Using only CO2e targets makes it
impossible to measure progress toward reducing individual gases and to compare
targets and progress with scenarios based on specific gases (such as NZE which ismainly CO2 based).

•

Not include offsets – Serious methodological and conceptual problems withoffsetting mean that financial portfolio and sectoral targets must not be wholly or
partially met with the use of offsets by companies or banks. This is consistent with theposition of the Science Based Targets initiative (SBTi), the Race to Zero, 26 and HLEG. 27•

Be transparent and accountable – banks’ transition plans should clearly specify target
timetables, metrics, scopes, gases covered and sectors included. Transition plans
should outline what actions will be taken to meet the targets, including engagement
strategies with financial sanctions. Reporting on progress toward meeting targets
should be done annually and verified by third parties. If any targets are missed,
emission reductions will need to be steeper in future to compensate.

•

Measure emissions for the full term of loans - banks shall take responsibility for
financed emission up to the original maturity of loans and not remove loans fromfinanced emissions calculations if these are securitized into bonds and sold.

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KEY ALIGNMENT AND COMPANY ASSESSMENT RESOURCES
While assessing the decarbonisation trajectories of finance and portfolio companies is arelevant exercise, it is only complementary to robust sectoral policies.
It is recommended to use the following resources for:•••

Building financial institution transition plans in line with a 1.5 °C Scenario:o The recommendations from the UN High-Level Expert Group on net zero,
published during COP27, that provides key criteria for non-state entity net-zerocommitments and plans.
o The criteria of the UN Race to Zero Campaign. The Net Zero Banking Alliance(NZBA) is a partner of Race to Zero, as are all the sectoral alliances that makeup the Glasgow Financial Alliance for Net Zero (GFANZ).
o GFANZ’s November 2022 report, “Financial Institution Net-zero Transition
Plans: Fundamentals, Recommendations and Guidance.”
Assessing the credibility of the corporate and financial institution transition plans:o The Science Based Targets initiative (SBTi) and its sectoral target-setting
methodologies and validation process. Science-based targets are useful toassess whether companies have set decarbonization targets aligned with theParis Agreement, but are not in themselves sufficient to do so. They do not
ensure that companies are on track to meet these targets, nor that they are
implementing the changes in business models and activities that arenecessary for 1.5° scenarios.
o The Climate Action 100 + benchmark by five investor networks (PRI, AIGCC,
Ceres, IGCC and IIGCC). This benchmark provides some useful indicators toassess the credibility of company transition plans, notably regarding carbon
neutrality and intermediate decarbonization targets, climate disclosures,
governance and capex allocation.
o The Assessing Low Carbon Transition (ACT) by the French Environmental
Agency (ADEME) and the CDP. The intent of this methodology is to provide a
granular analysis of company transition plans and their implementation. While
the overall rating attributed does not provide a clear benchmark for alignment
with a 1.5°C trajectory, the methodology contains useful information and datathat can be used to assess the credibility of transition plans.
o The PACTA scenario analysis program, now hosted by Rocky Mountain
Institute (RMI).
Assessing the quality of fossil fuel policies adopted by financial institutions:o Reclaim Finance has developed the Coal Policy Tool and the Oil & Gas Policy
Tracker. These tools analyse the quality of the policies adopted by banks,
insurers, asset owners and banks.

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Transition Pathway Initiative (TPI) 28 assessments should be used with caution as these
consider that a company has a credible NZTP only by considering the date at which the levelof GHG emissions reaches that of a 1.5°C scenario, whereas for a trajectory to be truly aligned,
the entire projected carbon budget must be considered.

SCOPE OF APPLICATION OF THE NZTP
The NZTP shall apply to all banking activities, in all business lines, branches, subsidiaries andjoint ventures of banking groups worldwide. This shall include:
•

•

•

•

Lending activities, including retail, SMEs, term loans (dedicated or corporate, bilateralor syndicated); project finance via special purpose vehicles/companies; revolving
credit facilities; bridge loans; reserve-based lending; borrowing base facilities; export
finance and all trade finance facilities; acquisition finance.
Underwriting and structuring activities, including share issuances as well as bondissuances, both dedicated such as project bonds and for general-purpose corporate
financing, as well as securitization.
Advisory services such as mandated lead arranger activities (or “lead arranger”, or“structurer”) for bond issues or syndicated loans, Mergers and Acquisitions (M&A)
advisory activities, or index funds’ management activities.
Activities in debt and equity capital markets.

In this document, the term "financial services" refers to all the activities listed above.
Dedicated loans must be allocated to an escrow account that the company uses to financethe intended activity or project, in order to ensure that the funding provided by the bank isallocated to the activities initially planned.
The NZTP shall apply to new financing as well as refinancing, and to both existing clients aswell as new clients.
For subsidiaries of banks with insurance and asset management activities, the level ofambition of the NZTP that applies to them shall be at least equivalent to that of the group. For
more information, see Reclaim Finance's recommendations for asset managers, asset owners
and insurers.
The NZTP applies from the date of publication of the policy. Existing loans can be excluded,
but the policy applies if the loans are renewed over time.
Any update of the NZTP shall be accompanied by a communication on its impact on the bank’s
corporate and project finance activities.
Any exceptions to the policy should be limited in time, publicly disclosed, justified, anddetailed. They should be accompanied with a time-bound engagement period to quickly bring
the financed and portfolio companies in line with the NZTP. A list of companies benefitingfrom any NZTP exceptions should be published annually.

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Banks must indicate the level of implementation of their NZTP to know if the policy covers
both subsidiaries and groups, including financing subsidiaries.

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ENERGY SECTOR IN GENERALCOMPANY DATABASES TO BE USED
Banks must indicate in their NZTP which database(s) they use to apply their restriction rules
in managing their financing activities.
For their sectoral coal policies, banks shall use the Global Coal Exit list (GCEL), updated
annually by Urgewald. This list gives access to information about 2,800 companies playing asignificant role in the thermal coal value chain (coal miners, coal power producers, companies
involved in coal exploration, processing, trading, transport, logistics, engineering,transmission, equipment manufacturing, coal to gas/liquids production, coal-related services
in operation & maintenance/mining/procurement and construction/advisory, undergroundcoal gasification, and other coal-related activities), which meet at least one of the following
criteria:••••

Companies with coal power, coal mining or coal infrastructure expansion plans.
A coal share of revenue or power production of at least 20%.
An annual thermal coal production of at least 10 Mt.
An installed coal-fired power capacity of at least 5 GW.

These thresholds will be lowered to 10% at the end of 2023 for the next update of the GCEL.
The GCEL includes information on companies planning the addition of an annual productionof 2500 Mt of coal, and 476 GW of new coal power capacity. It also covers companies withplans to build new coal infrastructure such as ports or railways which can be instrumental in
the opening of new coal basins. Companies with expansion plans shall be the first ones to be
excluded since any new coal project is incompatible with a 1.5°C scenario. This allows
financial players not only to take measures aimed at protecting themselves against financial
risks, but also allowing them to be more efficient at tackling the climate crisis.
The GCEL also covers companies above a specific relative threshold, referring to the share of
their activity in the coal sector, regardless of their size. The metrics used for power companies
are the share of coal power generation for power companies first, the closest to the realclimate impact of a company, and then the share of power capacity in the absence of the first
metric. The last metric used is the share of revenues of the company, if the two first metrics
are not available, because it is less relevant to the real climate impact of the company and canvary considerably from one year to another. The share of revenues is the only metric used forother coal-related companies such as coal mining or coal infrastructure companies. These
different metrics are important because the use of different metrics can have an important
impact on the number of companies covered by a specific threshold.

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To be able to cover companies whose share of activity in the coal sector is low, but which
produce large quantities of coal or coal-fired electricity in absolute terms, the GCEL also uses
absolute thresholds for the coal mining and coal power sectors. The metric used for coalmining is the annual amount of coal produced in million tonnes per year (Mtpa). The metricused for coal power is the coal power capacity.
For their sectoral policies in oil and gas upstream and midstream sectors, banks shall use the
Global Oil & Gas Exit list (GOGEL), updated annually by Urgewald. This database gives data on
the activities of oil and gas companies according to the following criteria:
•
•
•
•
•
•
•
•

Total oil and gas production.
Unconventional oil and gas share of production.
Total short-term expansion plans.
Share of unconventional oil and gas short-term expansion plans.
IEA NZE expansion overshoot
Capital expenditures on oil and gas exploration.
Fossil fuel share of revenue.
Reputational risk projects.

Other databases provided by private market players could be used in addition to the GCEL and
GOGEL, in particular to cover the downstream of the oil and gas sector. However, werecommend banks to use them with caution: forward-looking data about the expansion plansof companies and their activities in some unconventional oil and gas sectors might be
missing, as well as granular information necessary to identify the relevant corporate level(group and subsidiaries) exposed to a specific activity. Banks should also make sure that thedefinitions used match their own policies.

POINTS OF ATTENTION FOR THE OIL AND GAS SECTOR
In order to evaluate a company’s exposure to a specific sector, its impact on that sector andits decarbonization pathways within that sector, it is recommended to use a metric based on
absolute values (mmboe in production or in reserve, tCO2e in scope 1, 2 and 3, etc.). 29 Relativevalues (% of revenue, % of number of companies, % of GHG emissions, % of power assets firedby coal or with more than X gCO2e/kWh in average, etc.) can be used as additional indicators
applicable to the whole value chain or for specialized companies (joint ventures dedicated toa specific project, oil and gas service companies, mining or coal power companies, etc.).
When banks have adopted measures related to unconventional oil and gas, it is recommended
to use a definition matching the one used by the GOGEL, which includes the following sectors:
•
•
•
•
•

Extra heavy oil (API gravity index < 15)
Tar sands
Coal bed methane
Fracking
Ultra-deep offshore oil and gas (depth > 1,500 meters) 30

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Oil and gas resources located in Arctic area as defined by the Arctic Council’s
Assessment and Monitoring Programme (AMAP) 31

Banks could also rely on the definition recommended by the Scientific and Expert Committeeof Paris’ Observatory of Sustainable Finance 32, which also includes tight oil and gas, 33 gas
hydrates, 34 and oil shale.
Where the oil and gas sector policy refers to the upstream, midstream and downstream
sectors, particularly in the expectations for financed and portfolio companies’ climatetransition plans, the breakdown of associated activities to which it applies shall be read as
follows. 35
Upstream
Exploration
Drilling
Production
Processing

Midstream
Transportation by rail, road,pipeline, and shipping
Pure trading
Storage
Gas Liquefaction
LNG regasification

Downstream
Oil Refining
Distribution
RetailUse (power, heating, etc.)
Energy efficiency services

Where the oil and gas sector policy refers to Scope 1, 2 and 3 GHG emissions, particularly inthe expectations for financed and portfolio companies’ climate transition plans, thebreakdown of the different associated emissions sources to which it applies is as follows:

Source: ACT Methodology for the Oil and Gas sector (ADEME, CDP)

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Definitions
This section provides definitions of some important terms used in this document.
Company in transition – A company with a credible decarbonization plan aligned with a 1.5°C
scenario with low or no overshoot and a limited volume of negative GHG emissions, including
at least a comprehensive and public climate transition plan, and respecting key milestones
such as the end of fossil fuel expansion.
Climate transition plan (for companies) – A set of commitments, implementation andmonitoring measures undertaken by a company to contribute to the fight against global
warming. Such a policy must be comprehensive and credible and shall aim at contributing tolimiting global warming to 1.5°C with low or no overshoot and a limited volume of negative
GHG emissions. The plan should be sufficiently legible to be easily assessed by Banks.
Net zero transition plan (NZPT) – A set of general and sectoral policies adopted by banks topublicly detail how they intend to decarbonise their financing, investment, and advisory
activities along a 1.5°C scenario with low or no overshoot and a limited volume of negative
GHG emissions.
Coal developer – Companies are identified as coal developers if they meet at least one of thefollowing criteria:•••

Mining: companies engaged in coal exploration activities, planning to develop newcoal mines, extend their coal mines by applying for new permits or that are involved incoal exploration activities.
Power: companies planning to develop new coal-fired power capacity of at least 100
MW prorated (based on a company’s ownership of a project, or on the number ofcompanies involved in a project).
Services: companies involved in the development or expansion of coal transportation
assets or infrastructure assets dedicated to support coal mines, coal transportationand coal-to-gas facilities.

Such companies are listed in the “Expansion” criteria of the Global Coal Exit List.
•••

Companies extending the lifetime of existing coal mines and/or coal plants.
Companies purchasing existing coal assets.
Companies selling services or equipment supporting coal expansion.

Oil & gas developers - Companies intending to add oil and/or gas resources to theirproduction capacities in the short term (at least 20 mmboe of resources to their production
portfolio in the near future), i.e. resources associated with assets under development and field
evaluation (the two stages preceding production), or in the long term by their involvement in
exploration activities; or companies with oil and/or gas pipelines or LNG terminals proposedor under construction.

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Exclusion – A measure consisting of the total exclusion of a type of activity, company, or
project from a financial service. The date and modalities of entry into force of such a measuremust be precisely defined.
Infrastructure coal project – Transportation assets or infrastructure assets dedicated tosupport coal mines, coal transportation and coal-to-gas facilities.
New upstream oil and gas projects – Exploration or development of new oil and gas fields(i.e. fields that are not yet in production), or the redevelopment or expansion of existing fields
already in production.
New midstream oil and gas projects – Development of new oil and gas transportation andstorage infrastructure, including pipelines and LNG export or import terminals.
Power producer – Company involved in the production of electricity, either as a utility or a n
operator of power generation facilities.
Restriction – A measure consisting of the partial exclusion of a type of activity, business or
project from financial services (e.g. ending some but not all financial services to these
activities, increasing the interest rate on a loan (or green weighting factor 36), etc.). The
restriction may be related to being temporary, being subject to a threshold or having specificexemptions.
Sustainable power –Electricity from renewable energy sources by installations with limited
impact on climate, ecosystems and that meet human rights standard such as Free, prior andinformed consent of Indigenous Peoples (FPIC) throughout the value chain, including in the
future. This includes solar (photovoltaic and thermal), wind (on and offshore), mini-hydro,
wave and tidal, geothermal.
Energy efficiency – equipment and technologies that improve stability of the energy system
and maximise sustainable energies integration, such as mini-grids or off-grid renewablesystems, energy storage, demand reduction and management and grid modernisation.
Unabated power plant – Power plant with no facilities to capture GHG emissions during
operation.
Unsustainable power – Electricity production that has a significant impact on the climate,ecosystems and human rights throughout the value chain in which it operates, including in the
future. This includes nuclear, industrial-scale biogas and biomass-fired power plants,
hydropower plants that do not comply with the recommendations of the World Commission
on Dams 37, waste-to-energy and any form of hydrogen that is not produced directly fromsustainable energy sources.

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COAL SECTOR
GENERAL SECTOR OVERVIEW
The coal sector is a long way from aligning with 1.5 °C and even continues to expand. Today,
2,400 coal power plants are in operation, with a total capacity of nearly 2,100 GW. 38 Global
coal use is set to rise by 1.2% in 2022, surpassing 8 billion tonnes in a single year for the firsttime and eclipsing the previous record set in 2013. 39 476 GW of new coal-fired power capacity
are still in the pipeline worldwide (enough to increase the world’s current coal power capacity
by 23%), 61% of this in China. 40
Only 27 of the 1,064 listed in the Global Coal Exit List have announced coal exit dates alignedwith a 1.5 °C scenario, and 490 of them still plan to develop new coal assets. 2,500 Mtpa of
new coal mining capacity is in the pipeline worldwide (37% of the world’s current thermal coalproduction), with 39% of this in China. 41
Any delay in phasing out coal would jeopardize meeting the 1.5°C target and significantly
increase financial risks. Coal companies risk wasting more than US$1.4 trillion in stranded
assets under a 1.5°C scenario. 42 42% of global coal power plants already run at loss, this could
rise to about 50% of the thermal coal capacity by 2030, and 72% would be unprofitable by2040. In a “below 2°C” scenario, investors and governments would likely face over US$267
billion in stranded assets. 43
Beyond its major contribution to global warming, coal poses serious environmental and publichealth issues: coal was responsible for over 60% of global SO2 emissions 44 while air pollution
from outdoor sources caused more than four million premature deaths in 2021 (85% of whichwere in emerging and developing countries). The IMF estimated the world can realize a global
net social benefit equivalent to US$85 trillion by phasing out coal. 45

OVERALL OBJECTIVES
According to the IPCC, UNEP and IEA, for the coal sector to be aligned with the objective oflimiting global warming to 1.5°C, several conditions must be met.
The development of coal mines must stop immediately: 89% of coal reserves proven in 2018
must remain unextracted in 2050. 46 Therefore, no new coal mines must be developed, and thelifetimes of existing mines must not be extended. 47
Investment in coal supply must fall by 75% from 2021 to 2030, with the remaining coal-related
investment focused on maintaining production at existing mines and on reducing theiremissions intensity while waiting for definitive closure.
Coal demand must fall by 45% by 2030, and by 90% by 2050 (reaching 540 million tonnes ofcoal equivalent (Mtce)) 48 and all coal power plants must be closed by 2030 in advanced
economies and by 2040 worldwide. 49 As a result, coal trade must decline to about 50% its
current level by 2030, and 90% by 2050. 50
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Coal mine methane emissions must decline about 70% from 2021 levels by 2030 and about
95% by 2050. 51 This result can only be achieved through large-scale mine closures. 52

RECOMMENDATIONS FOR RULES AND STANDARDS
Banks shall commit to reduce to close to zero their exposure and not to further provide
financial services to the coal sector by 2030 in OECD and European countries, and by 2040
worldwide.

1. Recommendations on targeted restrictions at project level
Banks shall immediately end financial services, including advisory services, project anddedicated financing to new coal mines, plants, or infrastructure projects, expansion of existing
projects or retrofits extending the life of existing projects.

2. Recommendations on targeted restrictions at corporate level
What to expect from companies
Banks shall expect coal companies to have no plans for coal expansion, and to adopt a
credible and public coal phase-out plan aligned with a 1.5°C scenario. Such a plan shall
include, at least, the following indicators: 53
 A commitment to close all the global coal facilities in the OECD and European
countries by 2030, and globally by 2040.
 No coal expansion plans, including the development of new coal mines, plants andinfrastructure, the expansion or retrofits extending the life of existing projects, as wellas the purchase of existing assets without a clear commitment to close them by 2030
if located in the OECD or European countries, or by 2040 elsewhere.
 A coal phase-out plan which includes:_ Facility-by-facility closure dates. 54 Assets shall not be sold or converted to fossilbased activities or biomass;_ Just and sustainable transition plans, including guarantees concerning the capacity
to fund and implement all worker and environmental obligations (decontamination,
retraining, infrastructure decommissioning, etc.) 55
In case the facility is not closed but sold, banks shall expect strong guarantees that the newowner will: Close the facility before 2030 if it is located in the OECD or European countries, orbefore 2040 elsewhere.
 Not convert coal plants to fossil fuel-fired or biomass-fired plants.
 Provide sufficient financial means and measures to ensure that all social andenvironmental obligations are duly met.

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In case the facility is not closed but converted to another use, banks shall expect strong
guarantees from the coal company that: A comparative analysis shows that this conversion is economically, ecologically,financially, and technically more advantageous than closure or replacement by
renewable energies with equivalent production capacity.
 An environmental and climate impact assessment demonstrates that the conversion
will not result in increased GHG emissions across the value chain (and not just at the
combustion stage).
 A closure deadline consistent with a 1.5°C scenario with a just and sustainabletransition plan, including guarantees concerning the capacity to fund and implement
all worker and environmental obligations. 56
Claims of future retrofitting with carbon capture and storage or conversion to fossil gas,
biogas, hydrogen, biomass, or ammonia co-firing shall not be used to delay coal-fired plantclosures. 57
Banks shall not consider a decarbonization target or a net-zero commitment as a substitutefor a credible coal phase-out plan, regardless of their validation by the SBTi.

Restrictions at corporate level
Banks shall adopt time-bound restrictions on coal companies, with the aim of preventing the
expansion of the coal sector and supporting its phase-out. Achieving these measures will
require banks to: Make public their expectations from coal companies and associated exclusions.
 Implement an engagement policy towards the relevant companies to induce them tomeet expectations.
 Implement a progressive escalation strategy that would ultimately lead to stop
providing financial services to companies that don’t meet the expectations.
Banks shall immediately end support to coal expansion by stopping providing financial
services to companies which participate in the expansion of the coal sector.
Banks shall adopt timed restrictive measures to progressively reduce their exposure to thecoal sector and encourage companies that still benefits from their financial services toprogressively phase out their coal activities:
 Immediate stop to providing financial services to companies which derive more than
10% of their revenues from coal mining, and of companies which produce annuallymore than 10 million tons of coal. 58
 Immediate stop to providing financial services to companies which derive more than
10% of their power production or installed power capacity from coal, and of companies
with more than 5 GW of coal power capacity. 59

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Until December 2024, companies that are above these exclusion thresholds may be exempted
if they demonstrate their practical ability to move below the exclusion thresholds in the shortterm through the implementation of a credible and public coal phase-out plan.
 Commitment to reduce the relative and absolute exclusion thresholds used in the coal
policy to zero, with the aim to exit completely from coal by 2030 in OECD and European
countries, and by 2040 worldwide.
 Immediate commitment to stop providing by 2027 financial services to companies
that do not have a credible and public phase-out plan, aligned with a 1.5°C scenario,
which includes, at least:→ A detailed asset-by-asset closure (and not selling) timetable aligned with theobjective to exit from the coal sector by 2030 in OECD and European countries,
and by 2040 worldwide.
→ A just and sustainable transition plan for workers, local communities, and theenvironment. 60
 Immediate commitment to no further provide financial services:→ From 2024, to companies with no public commitment to phase-out their coal
activities by 2030 in OECD and European countries, and by 2040 worldwide.
→ From 2025, to companies with no detailed asset-by-asset closure (and not
selling) timetable aligned with the objective to exit from coal by 2030 in OECDand European countries, and by 2040 worldwide.
→ From 2026, to companies with no credible coal phase-out plan aligned with a
1.5 °C scenario, completed with a just and sustainable transition plan forworkers, local communities, and the environment. 61
 Immediate commitment to no further provision of financial services or having in theirfinancing portfolio any company that sells (and does not close) a coal asset, unlessthe new owner offers sufficient guarantees that the asset will be closed by 2030 inOECD and European countries, and by 2040 at the latest elsewhere via a just andsustainable transition plan for workers, local communities, and the environment. 62
An exception to the above measures may be made for project financing or dedicated financing
to energy transition activities (e.g. the deployment of sustainable energy). Dedicated financing(for example via use of proceeds bonds) must be explicitly earmarked and must not be used
for other activities. More specifically, an exception could be tolerated for green bonds or othersustainable use of proceeds bonds if the issuer's definition of green is rigorously verified. A
Second Party Opinion on the issuer's framework alone does not guarantee the sustainableattributes of these debt instruments. It is recommended for banks to have a public frameworkthat clearly defines the projects they may finance with sustainable debt market instruments
and to verify the compatibility of the overall strategy of the issuer with their own commitments.
This exception must remain temporary, and only apply for the time needed for the company
to align its corporate strategy with a 1.5°C scenario. It shall not apply to coal developers.
Sustainability-linked bonds (SLBs) or any general-purpose corporate financing shall not be
subject to such an exception because the financing is not earmarked for specific activities
and could be used for unsustainable activities.
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Banks should commit to phasing out their coal trading activities in a manner consistent withthe timetable recommended by science.

3. Recommendations on targeted restrictions on metallurgical coalBanks shall immediately end financial services to: New metallurgical coal mines and related infrastructures, as well as to their expansion; Coal mining companies with metallurgical coal expansion plans.
N.B. Banks shall disclose the database used to evaluate the companies exposed to the coalsector. It is therefore recommended to use the GCEL (For more information, see “Companies
database to be used” above).

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OIL & GAS SECTOR
GENERAL SECTOR OVERVIEWOver half of global emissions are related to the production or use of oil and gas.
Instead of aligning with 1.5°C, oil and gas companies are continuing to develop massive newcapacity for oil and gas production and transport. In 2022, upstream investment increased by
13% compared to 2021. 63 According to the IPCC, cumulative capex/opex for the explorationand extraction of oil and gas in new fields is expected to reach more than US$4.2 trillion in
total between 2020 and 2030 and climb to US$570 billion annually by the end of the decade. 64
The massive gap between industry projections of oil and gas production trajectories and a
1.5°C scenario increases related financial risks: over US$1 trillion of oil and gas assets risk
becoming stranded when climate action will be strengthened and with the development ofalternative energy sources. 65

OVERALL OBJECTIVES
According to the IPCC, UNEP, and IEA, for the oil and gas sector to be aligned with a 1.5°C
scenario, the expansion of oil and gas production must stop immediately. No exploration for
new resources is required, and no new oil fields are necessary, beyond those alreadycommitted as of 2021. No new fossil gas fields are needed beyond those already underdevelopment. Many of the LNG facilities currently under construction or at the planning stage
are not needed. 66
According to the IEA’s World Energy Outlook 2022, declining demand for oil and gas in their
NZE scenario can be met “through continued investment in existing production assets without
the need for any new long lead-time projects.” 67 In the NZE, fossil gas demand drops from4,200 billion cubic meters (bcm) in 2021 to 3,300 bcm in 2030, and 1,200 bcm in 2050. Oil
demand drops from 95 million barrels per day (mb/d) in 2021 to 75 mb/d in 2030, and to lessthan 25 mb/d in 2050. 68
Investments in oil and gas decline even faster than demand in the NZE, falling by around 50%
from the 2017-21 average through 2030 for both oil and fossil gas. 69 Continued investment inexisting fossil fuel operations is needed to reduce their emissions-intensity, especially of
methane. Energy-related methane emissions drop by 75% by 2030 in the NZE through reducing
leakage and venting and decreasing fossil fuel extraction. 70

RECOMMENDATIONS FOR RULES AND STANDARDS
Banks shall commit to reduce to close to zero their exposure and not to further provide
financial services to the upstream and midstream oil and gas sector by 2050 worldwide.

1. Recommendations on targeted restrictions at project level

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Banks shall immediately end financial services, including advisory services, project anddedicated financing to new upstream and midstream oil and gas projects, and to their
expansion.

2. Recommendations on targeted restrictions at corporate level
What to expect from companies
Banks shall expect oil and gas companies operating in upstream and midstream sectors tocommit to cease their expansion plans and to meet, in the short-term, the following minimal
criteria:
 Immediately commit to a 2050 net-zero objective based on a 1.5°C scenario.
 Meet milestones, including:→ End of new upstream and midstream oil and gas projects.
→ Adoption of oil AND gas production reduction targets by 2030.
→ Allocation of most of capex to sustainable power. 71
 Adopt a comprehensive climate transition plan that allows investors to assess itsalignment with a 1.5°C scenario with low or no overshoot and a limited volume ofnegative GHG emissions.
 Commit to submit the above-mentioned plan and an assessment of its ongoing
implementation in recent years to an annual vote (“Say on Climate”) at the Annual
General Meetings (AGM).
A comprehensive NZTP shall include, at least, the following indicators:
 Short- and medium-term GHG emissions reduction targets on Scopes 1, 2 and 3,
expressed in both absolute and intensity terms, encompassing all its activities.
 Possible contribution of captured GHG volumes to achieving emissions reduction
targets.
 Any carbon removal approaches that may be implemented shall be only tocomplement reduction targets.
 Targeted energy mix evolution for short- and medium-term.
 Short- and medium-term capex plans disaggregated by activity and by allocation
between maintenance and development of the Company’s assets.
 Short- and medium-term opex disaggregated by activity and by cost item.
 Explanation of baseline scenario used to set decarbonization targets and how thisconsiders the best available science.
 Envisaged actions to reduce methane emissions along the value chain, including
flaring, leakage control and venting. 72

Restrictions at corporate level
Banks shall adopt time-bound restrictions on a growing number of oil and gas companies,
with a focus on halting expansion, as well as initiating a controlled decline in oil and gas
production. Achieving these measures will require the bank to:
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 Make public its expectations from oil and gas companies and associated exclusions.
 Implement an engagement policy towards the relevant companies to induce them tomeet expectations.
 Implement a progressive escalation strategy that would ultimately lead to stop
providing financial services to companies that don’t meet the expectations.
Banks shall adopt restrictive measures over time to induce oil and gas companies to stop theiroil and gas expansion plans: Immediate commitment to stop providing by 2025 at the very latest financial services
to all companies that are still involved in new upstream and midstream oil and gas
projects. In the meantime, the engagement policy must be sufficiently robust to ensurethat companies adopt a plan to cease fossil fuel expansion and adopt a plan to reducefossil fuel production.
Banks shall adopt restrictive measures over time to gradually reduce their financial services
to oil and gas companies, and to induce these companies to undertake a managed decline in
oil and gas production and operation by: Immediately making new financial services conditional on a commitment by the oiland gas companies to a net zero target by 2050 aligned with a 1.5 °C scenario.
 From 2024, making any new financial services conditional on a commitment by the oiland gas companies to adopt:→ Reduction targets by 2030 in oil AND gas production.
→ A comprehensive climate transition plan that allows investors to assess it
against a 1.5 °C scenario as a benchmark.
→ This climate transition plan is submitted to an annual vote at the AGM.
An exception to the above measures may be made for project financing or dedicated financing
to the energy transition activities (e.g., the deployment of renewable energy). Any dedicatedfinancing (for example via use of proceeds bonds) must be explicitly earmarked and must not
be used for other activities. More specifically, an exception could be tolerated for green bonds
or other sustainable use of proceeds bonds if the issuer’s definition of green is rigorously
verified. A Second Party Opinion on the issuer’s framework alone does not guarantee thesustainable attributes of these debt instruments. It is recommended for banks to have a public
framework that clearly defines the projects they may finance with sustainable debt market
instruments and to verify the compatibility of the overall strategy of the issuer with their own
commitments.
This exception must remain temporary, and only apply for the time needed for the company
to align its corporate strategy with a 1.5°C scenario. Sustainable Linked Bonds (SLBs) or any
general-purpose corporate financing shall not be subject to such an exception because thefinancing is not earmarked for specific activities and could be used for unsustainable
activities.

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In the case a policy is adopted on unconventional fossil fuels, banks shall apply it to theactivities and products listed in the comprehensive definition given in the “General
Recommendations”, and they shall stop financial services to companies that: Produce more than 25% of their oil and gas from unconventional resources andcommit to lowering this threshold to 5% by 2030.
 Are still involved in new unconventional oil and gas projects.
Banks should commit to reduce their oil and gas trading activities at a rate consistent with
science.
N.B. Banks shall disclose the database used to evaluate the companies exposed to the oil andgas sector. It is recommended to use the GOGEL.

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POWER SECTOR
GENERAL SECTOR OVERVIEW
Coal-fired power generation is one of the highest emitting sectors in the world. Although manyfinancial actors have already adopted restrictions on coal power funding, there are still 476
GW of new coal-fired power capacity still in the pipeline worldwide, 61% of this in China. 73
It is estimated that 42% of global coal power plants now run at a loss, and this number is
projected to rise to 50% by 2030. By 2040, 72% will be unprofitable. Even with a “below 2°C”
scenario, investors and governments will likely face over US$267 billion in stranded assets. 74
Despite its repeated depiction over the past couple of decades as a “clean alternative” to coal,fossil gas power emits high levels of GHGs, particularly when methane emissions from its
production and transport are considered. A fossil gas combined-cycle plant can emit 403 to
513 gCO2e/kWh from a life cycle perspective compared to 751 to 1095 gCO2e/kWh for coal
power. 75
In 2022, for the first time, global energy transition investments equalled fossil fuels
investments. 76 The significant shift toward “clean energy” is a trend unlikely to be reversed as
the energy world has entered what the IEA describes as “a new industrial age – clean energy
manufacturing age”. 77

OVERALL OBJECTIVES
According to the IPCC, UNEP, and IEA, for the power generation sector to be aligned with a
1.5°C scenario, fossil fuel-fired power capacity must stop expanding and all unabated plants
should be closed by 2040 worldwide. In the OECD and Europe, coal-fired plants should beclosed by 2030 and fossil gas-fired plants by 2035. 78 There must be an immediate halt toapprovals for new unabated coal-fired power plants. 79. No new unabated fossil gas-fired
power plants shall be built since fossil gas-fired power plants commonly have an operational
lifetime of at least 30 years. 80
Investments in the power sector must be massively reoriented from fossil fuels toconservation, efficiency, and sustainable energy. To meet the IEA’s NZE scenario, for every
one dollar spent globally on fossil fuels by 2030, at least nine dollars must be invested in what
the IEA classifies as “clean energy and efficiency investments”. 81 In the NZE, 40% of electricity
generation comes from wind and solar by 2030 when annual capacity additions of all
renewables reach 1,200 GW compared to the 290 GW renewables capacity installed in 2021.
To achieve this, the annual spending on “clean energy investments” (energy efficiency, clean
fuels and clean power, networks, and storage) needs to reach US$ 4.2 trillion in 2030. Thisrequires a larger contribution from the private finance than seen today: whereas public
spending currently plays a larger role, private capital will account for nearly 60% of global clean
energy spending (85% in advanced economies) by 2030. 82

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Ending the financing of the fossil fuel system does not mean reducing the financing of theenergy sector, quite the contrary. There is not enough capital flowing to the energy sector, itneeds to double by the end of the decade to get our energy system on track with the 1.5°C*
objective. This mean not only shifting existing financing away from fossil fuel but also attract
additional financing toward sustainable energy.
More specifically, investment in sustainable energy need to threefold between 2021 and 2030
and represent nine time the investment toward fossil fuels by 2030. This means that for every
dollar invested in fossil fuels, nine dollars should be invested in sustainable energy generation,energy efficiency, storage, grid expansion and modernisation.

RECOMMENDATIONS FOR RULES AND STANDARDS
Banks shall commit to reduce to close to zero their exposure and not to further provide
financial services to the production of unsustainable power according to the following
timeframe:
 Coal power in OECD and European countries by 2030.
 Fossil power in OECD and European countries by 2035 and by 2040 worldwide.
 All unsustainable power by 2040 worldwide.

1. General targets in the power sector
Banks shall adopt those financing trajectory and ratio at their own level. To do so, they should
publish a target for 2030 that is at least as ambitious as the one the IEA’s NZE projections andreinforce it with yearly interim target, at the very least for 2025. Moreover, banks shall publicly
disclose their sustainable power scope, exclude unsustainable power, and provide the detailof financing among sustainable power generation and other sustainable investments such asenergy efficiency investments.
Banks shall also make sure that they finance actual new sustainable energy capacity bymonitoring against what is needed according to the IEA: increasing renewable energy capacity
addition from 290 GW (2021) to 1200 GW every year by 2030, mainly through wind and solar.

2. Recommendations on targeted restrictions at project level
Banks shall immediately end financial services, including advisory services, project anddedicated financing to: New coal plants, expansion project of existing assets or retrofits extending the life ofexisting asset.
 New fossil plants of power producers and developers that don’t have a gas and oil
power exit plan by 2035 in Europe, and by 2040 worldwide.
 New unsustainable and biomass power plants.

3. Recommendations on targeted restrictions at corporate level
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What to expect from companies
Banks shall expect utilities and power generation compagnies to meet the following minimal
criteria:
 Immediate commitment to a net zero by 2050 objective aligned with a 1.5°C scenario.
 Immediately stop coal expansion plans and commit to meet in the short-term thefollowing milestones:→ Stop new unabated fossil fuel-fired and biomass-fired plants.
→ Commit to end coal-related activities by 2030 at the latest in OECD and
European countries, and by 2040 worldwide.
→ Commit to bringing fossil gas-related activities close to zero by 2035 at thelatest in OECD and European countries, and by 2040 worldwide.
→ By 2030, for every dollar spent on fossil fuel-fired power sector, at least 5
dollars shall be spent in sustainable power. 83 This ratio shall be increased to
1:9 if it includes energy efficiency measures and end-use. 84
 Adopt a comprehensive climate transition plan that allows investors to assess itsalignment with a 1.5°C scenario.
 Commit to submit the above-mentioned plan and an assessment of its ongoing
implementation to an annual vote (“Say on Climate”) at the AGM.
The climate transition plan shall include, at a minimum, the following indicators:
 Short-and medium-term GHG emissions reduction targets on Scopes 1, 2 and 3,
expressed in both absolute and intensity emissions, encompassing all activities.
 Possible contribution of captured GHG volumes to achieving emissions reduction
targets.
 Carbon offsetting approaches that may be implemented to complement the reduction
targets.
 Targeted energy mix evolution over short and medium terms
 Short- and medium-term capex plans disaggregated by activity and by allocation
between maintenance and development of any new assets.
 Short- and medium-term opex disaggregated by activity and by cost item.
 Explanation of baseline scenario used to set decarbonization targets and how thistakes into account the best available science.
Banks shall require corporate climate transition plans to include a credible plan for dated
closures of unsustainable assets, detailed on a facility-by-facility basis. These closures must
be planned at a pace consistent with a 1.5°C scenario and accompanied by just transition
plans, and funding for implementing all social and environmental obligations. 85
In case the plants are not closed but sold, banks shall expect strong guarantees from thepower producer that any new owners will: Close any coal plant before 2030 and any fossil gas-fired plant before 2035 if it islocated in the OCED or European countries, or before 2040 elsewhere.
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 Not convert any plants to other fossil fuels or biomass.
 Provide sufficient financial means and measures to ensure that all social andenvironmental obligations are met.
In case the plants are not closed but converted to other technologies, banks shall expect
strong guarantees from the power producer that: A comparative analysis shows that this conversion is economically, ecologically,financially, and technically more advantageous than closure or replacement bysustainable energy with equivalent production capacity.
 An environmental and climate impact assessment demonstrates that the conversion
will not result in increased GHG emissions across the value chain (and not just at the
combustion stage).
 A closure deadline consistent with a 1.5°C scenario, with a just and sustainabletransition plan, including the guarantees concerning the capacity to fund andimplement all workers and environmental obligations. 86
Claims that a future power plant will be retrofitted with carbon capture and storage orconversion to “low-carbon energy sources” (such as biogas or hydrogen 87) shall not be used
to delay a fossil fuel-fired plant’s closure. 88
Banks shall not consider a decarbonization target or a net-zero commitment as a substitutefor a credible coal phase-out plan.

Restrictions at corporate level
Banks shall adopt time-bound restrictions on an increasing number of fossil fuel andunsustainable power projects and companies, aiming to prevent the expansion of fossil andunsustainable assets in the power sector, while supporting their progressive phase-out.
Achieving these measures will require the banks to: Make public its expectations from power generation companies and utilities, and any
associated exclusions.
 Implement an engagement policy towards the relevant companies to induce them tomeet expectations.
 Implement a progressive escalation strategy that would ultimately lead to stop
providing financial services to companies that don’t meet the expectations.
Banks shall adopt restrictive measures over time to induce companies to stop their fossil andunsustainable expansion plans in the power sector:
 Stop financial services to all companies still involved in new coal plants.
 No new financial services to companies with no commitment not to develop new fossil
fuel and biomass plants (an exemption to this restriction may apply until 2025 forcompanies subject to engagement from investors through Climate Action 100+).

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Banks shall adopt restrictive measures over time to gradually reduce their financial services
to these activities, while encouraging compagnies to plan a phase-out of their assets andsupport renewable energy development by committing to: Immediate stop of financial services to companies which derive more than 10% of theirpower production or installed power capacity from coal, and of companies with morethan 2.5 GW of coal-fired power capacity. 89
 Immediately making new financial services conditional on a commitment by power
producers to the adoption of a net zero target by 2050 aligned with a 1.5°C scenario.
 From 2024, making new financial services conditional on a commitment by the power
producers to:→ Bring their fossil fuel activities close to zero by 2035 in OECD and European
countries, and by 2040 worldwide.
→ Allocate most of their capex to sustainable energy and exclude unsustainableenergy sources.
→ A comprehensive climate transition plan that allows investors to assess it
against a 1.5°C scenario as a benchmark and is subject to an annual vote at
the AGM (as described above).
 Immediate commitment to stop financial services to any company that sells any fossil
fuel-fired plant, unless:→ In case the plants are not closed but sold, banks shall expect strong guarantees
from the power producer that the new owners will: Close any coal-fired plant before 2030 and any fossil gas—fired plant
before 2035 if the plant is located in the OCED or European countries,
or before 2040 elsewhere.
 Not convert any plant to other fossil fuels or biomass.
 Provide sufficient financial means and measures to ensure that allsocial and environmental obligations are met.
→ In case new biomass or fossil gas plants are allowed, or in case plants are notclosed but converted to another technology, banks shall expect strong
guarantees from the power producer that: A comparative analysis shows that this conversion is economically,
ecologically, financially and technically more advantageous thanclosure or replacement by renewable energies with equivalent
production capacity.
 An environmental and climate impact assessment demonstrates thatthe conversion will not result in increased GHG emissions across thevalue chain (and not just at the combustion stage).
 A closure deadline consistent with a 1.5°C scenario, with a just andsustainable transition plan, including guarantees concerning thecapacity to fund and implement all worker and environmental
obligations. 90

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An exception to the above measures may be made for project financing or dedicated financing
to the energy transition activities (e.g, the deployment of sustainable energy). Dedicatedfinancing (for example via use of proceeds bonds) must be explicitly earmarked and must not
be used for other activities. More specifically, an exception could be tolerated for green bonds
or other sustainable use of proceeds bonds if the issuer’s definition of green is rigorously
verified. A Second Party Opinion on the issuer’s framework alone does not guarantee thesustainable attributes of these debt instruments. It is recommended for banks to have a public
framework that clearly defines the projects they may finance with sustainable debt market
instruments and to verify the compatibility of the overall strategy of the issuer with their own
commitments.
This exception must remain temporary, and only apply for the time needed for the company
to align its corporate strategy with a 1.5°C scenario. Sustainable Linked Bonds (SLBs) or any
general-purpose corporate financing shall not be subject to such an exception because thefinancing is not earmarked for specific activities and could be used for unsustainable
activities.

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CLIMATE LOBBYING
Banks shall adopt a responsible lobbying policy consistent with a 1.5°C scenario.
All lobbying activities in which banks participate and that are aimed at influencing public
officials (direct lobbying, such as governments, legislators, regulators, administration,international organisations, etc.) and public opinion (indirect lobbying, such as journalists,scientists, artists, etc.) shall apply to all their employees, subsidiaries and contractors, allbusiness areas, and all operational jurisdictions.
Banks shall commit, through a published code of conduct, to:
•

•

•
•

•
•

•
•
•
•
•

•

Align climate change-related lobbying objectives and activities with a 1.5°C objective
and establish an annual monitoring and review process to ensure that all direct andindirect climate change lobbying activities follow this commitment. 91
Disclose, for all geographies, the climate change related lobbying objectives andrecommendations (especially position papers submitted to public officials), as well as
the assessment of the influence that this lobbying has had on (a) supporting ambitious
public climate change policy, and (b) the company’s ability to deliver its own corporatetransition strategy.
Disclose, for all geographies, their membership of, support for and involvement in alllobbying groups engaged in climate change-related lobbying.
Establish a clear framework for escalation concerning misalignment between lobbying
positions adopted by these groups and the 1.5°C scenario 92. This escalation should
include leaving such lobbying groups if their activities are detrimental to reaching the
1.5°C target.
Disclose the agenda of meetings with public authorities and the nature of the publicdecisions targeted by the lobbying activities.
Disclose the budget spent on climate change-related lobbying, including the budget
spent directly, through the previously mentioned lobbying institutions and throughconsulting firms or other external bodies.
Create or participate in coalitions that have specific purpose of lobbying in support ofthe 1.5°C objective.
Commit not to challenge the phase out of fossil fuel facilities through investor-state
dispute settlement mechanisms (ISDS) and other legal mechanisms. 93
Commit to disseminate only science-based, up-to-date, and verifiable information orarguments, and not disseminate deliberately biased information.
Name a senior decision-maker who is responsible for implementing these policies.
Create or participate in coalitions with the specific purpose of lobbying in support ofthe 1.5°C objective. These should integrate all kind of financial institutions, data
providers, rating agencies, shareholder voting agencies, etc.
Sign the Global Standard on Responsible Climate Lobbying (RCLS) 94

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For more information, banks can refer to the methodology of indicator 7 (NZTP engagement)
set by the Climate Action 100+ and the Recommendation of the Council on Principles forTransparency and Integrity in Lobbying published by the OECD.

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1

World Meteorological Organization, Provisional State of the Global Climate in 2022, 2022

2

UNEP, Emissions Gap Report 2022, October 2022

The numbers in this table are rounded to the nearest 5. The Summary for Policymakers cites thenecessary reductions as 43% GHGs and 48% CO2. IPCC, Sixth Assessment report. Climate Change
2022: Mitigation of Climate Change, Technical Summary Table TS-2, p.71, April 2022.
3

4

UNEP, Production gap report 2021, October 2021

IPCC, Sixth Assessment report. Climate Change 2022: Mitigation of Climate Change, B.7.1, p. 20, April
2022)
5

6

Working group II of IPCC, Technical Summary of the 6th assessment report, November 2021

World Meteorological Organization, Eight warmest years on record witness upsurge in climate change
impacts, November 2022
7

World Meteorological Organization, WMO Atlas of Mortality and Economic Losses from Weather,
Climate and Water Extremes (1970–2019), 2021
8

Munich Re, Hurricanes, cold waves, tornadoes: Weather disasters in USA dominate natural disasterlosses in 2021, January 2022
9

10

Ibid.

11

UNEP, Adaptation finance gap report, November 2022

12

ICFR, The cost of doing nothing, December 201913

World Bank, Groundswell Part 2: Acting on Internal Climate Migration, September 2021

Global Commission on the economy and climate, Unlocking the Inclusive Growth Story of the 21stCentury, 2018
14

15

Deloitte, Global Turning Point Report, May 2022

16

Reclaim Finance, From the fossil fuel age to the clean energy era, October 2022

17

Climate policy institute, Global Landscape of Climate Finance: A Decade of Data, October 2022

18

Reclaim Finance, From the fossil fuel age to the clean energy era, October 2022

19

“Financed emissions” include emissions related to lending and underwriting activities.

Reclaim Finance, The IEA’s net-zero 2050 : The new normal and what’s left to be done, December
2021
20

For more information: IISD, Lighting the Path: What IPCC energy pathways tell us about Paris-aligned
policies and investments, June 2022
21

33 / 38

Reclaim Finance – Recommendations for banks – August 2023

For methodologies see PCAF, Financed Emissions: The Global GHG Accounting and ReportingStandard. Part A, December 2022. NZAOA, Target-Setting Protocol 3rd edition, January 2023.
22

Race to Zero Expert Peer Review Group, Interpretation Guide, Version 2.0, June 2022, para 13eg
(accessed 23 March 2023).
26

For more information: GFANZ, Financial Institution Net-Zero Transition Plans: Fundamentals,
Recommendations and Guidance, pp.78-79, November 2022; see also Race to Zero Expert Peer Review
Group, Interpretation Guide, Version 2.0, June 2022, para 7 (accessed 23 March 2023); and UN HighLevel Expert Group on the Net Zero Emissions Commitments of Non-State Entities, Integrity Matters:
Net Zero Commitments by Business, Financial Institutions, Cities and Regions, p.19, November 2022.
23

PCAF, Financed Emissions: The Global GHG Accounting and Reporting Standard. Part A, December
2022
24

GFANZ, Financial Institution Net-Zero Transition Plans: Fundamentals, Recommendations andGuidance, p.77, November 2022
25

Race to Zero Expert Peer Review Group, Interpretation Guide, Version 2.0, June 2022, para 13eg
(accessed 23 March 2023).
26

UN High-Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities, Integrity
Matters: Net Zero Commitments by Business, Financial Institutions, Cities and Regions, p.19, November
2022.
28
For more information : Reclaim Finance, The TPI benchmark: misleading approach, dangerous
conclusion, December 2021
27

The halt to expansion stipulated by the IEA in its NZE relates to the opening of new production fields.
Furthermore, the research of the analysts who built the GOGEL shows that the data on company
revenues is unfortunately very approximate. Indeed, private data providers, in the absence of accurate
reporting from companies, are often forced to estimate the share of revenues derived fromunconventional hydrocarbons from a production amount and a proxy on revenues.
29

Not only is the data unreliable, but this results in an underestimate of the share of unconventional incompanies' activities - for example, a 20% revenue criterion in shale gas covers a much smaller numberof companies than a 20% production criterion. Finally, a growing number of companies are diversifying,increasing their activities in midstream and power generation, without decreasing their hydrocarbon
production, including in unconventional. As a result, the share of unconventional oil in their revenues isdecreasing without a decrease in production in absolute value.
There is therefore no decrease in the climate impact of these companies. The revenue metric can bejustified when the assessment is carried out on all or a significant part of the value chain, beyond
production, even though it would be possible to have an assessment based on volumes transported forwhat comes under the midstream.
Energy Policy, The impact of water depth on safety and environmental performance in offshore oiland gas production, Volume 55, 2013, Pages 699-705, April 201330

For more information: Reclaim Finance, Drill, baby, drill. How banks, investors and insurers are driving
oil and gas expansion in the Arctic, September 2021
31

34 / 38

Reclaim Finance – Recommendations for banks – August 2023

Observatoire de la finance durable, Recommandations du Comité Scientifique et d’Expertise portant
sur les hydrocarbures non conventionnels et les stratégies d’alignement, p. 10, Septembre 2021.
32

34

Ibid.

35

ADEME, Methodology of ACT in Oil & gas sector, p. 10, February 2021

36

For more information, see Natixis, Green Weighting Factor, 2020.

The World Commission on Dams, Dams and development. A new framework for decision-making,November 2000.
37

For more information : Global Energy Monitor, CREA, E3G, Sierra Club, SFOC, Kiko Network, CAN
Europe, LIFE, BWGED, BAPA, and Waterkeepers Bangladesh, Boom and bust coal 2022, April 2022
38

39

International Energy Agency, Coal 2022: analysis and forecast to 2025, December 2022

40

For more information : Urgewald, Global Coal Exit List 2022 : no transition in sight, October 2022

41

For more information : Urgewald, Global Coal Exit List 2022 : no transition in sight, October 2022

Environmental Research letters, Quantifying the regional stranded asset risks from new coal plants
under 1.5 °C, Volume 17, Number 2, February 2022)
42

Carbon Tracker, Powering Down Coal: Navigating the economic and financial risks in the last yearsof coal power, November 2018
43

International Energy Agency, Coal in Net Zero Transition: Strategies for rapid, secure, and peoplecentred change, November 2022
44

45International Monetary Fund, The Great Carbon Arbitrage, June 2022

46

Nature, Unextractable fossil fuels in a 1.5 °C world, September 2021

International Energy Agency, Coal in Net Zero Transition: Strategies for rapid, secure and peoplecentred change, November 2022
47

48

Ibid.

49

Climate Analytics, Coal phase-out

International Energy Agency, Coal in Net Zero Transition: Strategies for rapid, secure, and peoplecentred change, § 1.4.3, November 2022
50

3.2.1 International Energy Agency, Net Zero by 2050 : A roadmap for the global energy sector, § 3.2.1,
October 2021
51

International Energy Agency, Coal in Net Zero Transition: Strategies for rapid, secure, and peoplecentred change, § 1.4.4, November 2022
52

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Reclaim Finance – Recommendations for banks – August 2023

For more information : Reclaim Finance, How to exit coal : 10 criteria for evaluating corporate coalphase-out plans, October 2021
53

For more information : Climate Analytics, Global and regional coal phase-out requirements of theParis Agreement: Insights from the IPCC Special Report on 1.5°C, September 201954

For more information : International Energy Agency, Phasing out unabated coal : current status andthree case studies, October 2021. Beyond Coal, Just transition in the context of European power utilities
and Banks, August 2020.
55

56

Ibid.

For more information : International Energy Agency, CCS Retrofit : Analysis of the Globally Installed
Coal-Fired Power Plant Fleet, 2012. Bloomberg NEF, Japan’s Ammonia-Coal Co-Firing Strategy a Costly
Approach to Decarbonization, Renewables Present More Economic Alternative, September 2022
57

58

Urgewald’s GCEL currently lists 20%. They will be lowered to 10% of the in the updated plan of 2023.

Urgewald’s GCEL currently lists 20% of power production or installed power capacity from coalthresholds. They will be lowered to 10% of the coal share of power capacity in the updated plan of 2023.
59

For more information : International Energy Agency, Phasing out unabated coal : current status andthree case studies, October 2021. Beyond Coal, Just transition in the context of European power utilities
and Banks, August 2020.
60

61

Ibid.

62

Ibid.

Les Echos, Les investissements repartent à la hausse dans l'exploration et l'extraction pétrolière,
January 2023
63

IISD, Lighting the Path: What IPCC energy pathways tell us about Paris-aligned policies andinvestments, June 2022
64

65

Carbon Tracker, Unburnable Carbon: Ten Years On, June 2022

The NZE scenario of the IEA provides a pathway to meet global energy needs while having a 50%
chance of keeping global warming below 1.5°C. It was used as the reference scenario in the WEO 2021
and was updated in the WEO 2022 published in October 2022. It projected a reduction in oil and gas
production of 22 and 23% respectively by 2030 compared to 2021 levels and an end to the developmentof new oil and gas production projects and LNG terminals.
66

Despite the disrupted energy environment caused by the invasion of Ukraine, the need to halt oil andgas expansion as soon as possible remains a key feature of the IEA NZE scenario. The May 2021 NZE
scenario already projected to halt the development of new oil and gas fields, beyond those for which
the FID was approved before January 1st, 2022. Considering 2022's LNG capacity additions, the WEO
2022 version of the NZE highlights the need to also end the development of new LNG terminals, beyond
those approved by January 1st, 2023.

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Reclaim Finance – Recommendations for banks – August 2023

The completion of some projects that can swiftly enter production and operate for a limited time only
– mainly shale oil & gas projects – is not expressly forbidden in the WEO 2022 version of the NZE. The
IEA notably stresses that the invasion of Ukraine cannot justify a “new wave of oil and gas
infrastructure”, and that any new oil and gas fields will make it “even more challenging” to meet carbon
neutrality targets and “creates the clear risk that [the 1.5°C] target moves out of reach”. Concretely, anysuch project will require even greater reduction efforts in other sectors and activities.
67

International Energy Agency, World Energy Outlook 2022, p.164, November 2022

68

International Energy Agency, World Energy Outlook 2022, p.133-134, November 2022

69

International Energy Agency, World Energy Outlook 2022, Figure 3.22, November 2022

International Energy Agency, World Energy Outlook 2022, p.64, November 2022
According the Net-Zero-by-2050 scenario of the IEA, for every US$ 1 spent globally on fossil fuels in
2030, more than US$ 9 is spent on clean energy in the NZE. For more information : Reclaim Finance,
WEO 2022 – From the fossil fuel age to the clean energy era, October 2022.
70
71International Energy Agency, Curtailing Methane Emissions from Fossil Fuel Operations Pathways toa 75% cut by 2030, October 2021
72

73

For more information : Urgewald, Global Coal Exit List 2022 : no transition in sight, October 2022

Carbon Tracker, Powering Down Coal: Navigating the economic and financial risks in the last yearsof coal power, November 201874

UNECE, Carbon Neutrality in the UNECE Region: Integrated Life-cycle Assessment of Electricity
Sources, March 2022.
75

76

Bloomberg NEF, Energy Transition Investment Now On Par with Fossil Fuel, February 2023.

77

International Energy Agency, Energy Technology Perspectives 2023, January 2023.

International Energy Agency, Coal in Net Zero Transition: Strategies for rapid, secure and peoplecentred change, November 2022
78

79

International Energy Agency, Net Zero by 2050: A roadmap for the global energy sector, October 2021

IISD, Lighting the Path: What IPCC energy pathways tell us about Paris-aligned policies andinvestments, June 2022
80

81International Energy Agency, World Energy Outlook 2022, p.62, November 2022

82

International Energy Agency, World Energy Outlook 2022, p.138, November 2022

Bloomberg NEF, Investment Requirements of a Low-Carbon World: Energy Supply Investment Ratios,
October 2022.
83

84

Reclaim Finance, WEO 2022 – From the fossil fuel age to the clean energy era, November 2022.

37 / 38

Reclaim Finance – Recommendations for banks – August 2023

For more information : International Energy Agency, Phasing out unabated coal : current status andthree case studies October 2021. Beyond Coal, Just transition in the context of European power utilities
and Banks, August 2020.
85

86

Ibid.

Although these technologies provide an advantage in terms of lowering GHG emissions for electricity
generation, their level of maturity is far too low and the cost of conversion far too high to expect a
reduction in emissions from the sector in the medium term. For example, current production level for
low-carbon hydrogen is only around 0.5% of current hydrogen production being from low-carbon
sources, that is about 0.03% of global fossil gas production (Source : IGU, Global Renewable and lowcarbon gas report, 2021).
87

For more information : International Energy Agency, CCS Retrofit : Analysis of the Globally Installed
Coal-Fired Power Plant Fleet, 2012.
88

Urgewald’s GCEL currently lists 20% of power production or installed power capacity from coalthresholds, and 5 GW of coal-fired power capacity. They will be lowered to 10% of the coal share of
power capacity/generation and 2,5 GW of in the updated plan of 2023.
89

For more information : International Energy Agency, Phasing out unabated coal : current status andthree case studies October 2021. Beyond Coal, Just transition in the context of European power utilities
and Banks, August 2020.
90

For more information: PRI, Converging on climate lobbying: aligning corporate practice with investor
expectations, May 2018.
91

For more information: CERES, Blueprint for Responsible policy engagement on climate change, June
2020.
92

93

For more information : IISD, Investor-State Disputes in the Fossil Fuel Industry, December 2021.

94

For more information: PRI, Climate lobbying, March 2022.

38 / 38